EU Competition Law Overview - Competition Law - Lecture Slides, Slides of Competition Law and Policy

Download EU Competition Law Overview - Competition Law - Lecture Slides and more Slides Competition Law and Policy in PDF only on Docsity! EU Competition Law Overview Docsity.com The EU Basics • Created and governed by the EC Treaty, as amended Docsity.com The EU Basics • Turkey to join “without delay” if it meets criteria during December, 2004 review • Bulgaria and Romania “on track” to join by 2006 Docsity.com The EU Basics • 380 million citizens • With 10 new members, • population of 445 million • Largest integrated market in the world • GDP of US$9.46 billion (cf. NAFTA GDP of $11.9 billion) Docsity.com The EU Basics • The European Parliament – Members (MEPs) directly elected in Member State elections held every five years – Currently 626 MEPs – Sit in party political groups, not national delegations – In some areas, Parliament jointly legislates with the Council Docsity.com The EU Basics • The Commission is the primary enforcer of EU competition law – Decides cases – Issues Directives – Proposes Regulations – Issues Guidelines (“Notices”) – Directs policy debate (“White Papers” and “Green Papers”) – Participates in shaping of legislation Docsity.com The EU Basics • Structure of the Commission – President – Secretariat-General • Legal Service – 36 Directorate Generals (1 Commissioner in charge of each) – Competition Directorate (DG Comp) Commissioner Mario Monti Docsity.com The EU Basics • Commission Procedures – Since 1962, governed by Reg. 17/62 the “implementing regulation”) – Recently adopted Reg. 01/03 restructures the system of competition enforcement for the first time in 40 years Docsity.com The EU Basics • Reg. 01/03 – Creates new procedure for settlement of cases by giving order to cease infringing conduct (cf. cease and desist orders) – Expands investigatory powers of EC; empowers EC to question company employees about factual matters, and to search homes of employees Docsity.com The EU Basics • Reg. 01/03 – Substantially increases level of fines which EC may impose re procedural matters (obstruction of investigations, providing false information, failing to comply with EC orders) – Applies to all economic sectors with very limited exceptions; special regulations for certain sectors, such as transport Docsity.com The EU Basics • The European Court of Justice (“ECJ”) – 1 judge from each Member State – 8 Advocates General – Hears appeals from the Court of First Instance – Considers issues of law, not fact – Gives preliminary rulings on EC law to national courts Docsity.com Policies Underlying EU Competition Law • Traditional Competition Concerns – Maximizing efficiency – Protecting consumers from collusion and other restraints on free competition • Protecting small and medium-sized entities (“SMEs”) • Integrating the European economy (increasingly important in light of 10 new members) Docsity.com Principal Sources of EU Competition Law • EC Treaty Section 81 (formerly 85) [Cf. Sherman Act § 1] • EC Treaty Section 82 (formerly 86) [Cf. Sherman Act § 2] • European Community Merger Regulation (“ECMR”) [Cf. Hart-Scott-Rodino Act] Docsity.com Article 81 • Prohibits and automatically voids all: – agreements, arrangements and concerted practices – between “undertakings” – that affect trade between Member States – that have as their object or effect – the prevention, restriction or distortion of competition within the EU Docsity.com Article 81 Agreements, Arrangements & Concerted practices • Not restricted to formal contracts • only “requires a joint intention of the parties, without there being any need for them to express their consent formally” • consent may arise implicitly from clear and unequivocal conduct • sufficient if one party limits its freedom of action with regard to another Docsity.com Article 81 Agreements, arrangements and concerted practices • “Concerted practices” are “a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition” Docsity.com Article 81 “Prevention, Restriction or Distortion of Competition” • Article 81(1) provides non-exhaustive list of examples: – fixing purchase or selling prices or other terms of trade – sharing markets or sources of supply – discriminatory practices – tying arrangements Docsity.com Article 81 “Prevention, Restriction or Distortion of Competition” • EC Guidance on what is “appreciable”: – 1968 Notice on Cooperation Agreements (encouraging some cooperation among SMEs) – 1997 De Minimis Notice (e.g., horiz. agreements for production of goods not covered by Art. 81 if less than 5% of goods affected) Docsity.com Article 81 “Prevention, Restriction or Distortion of Competition” • Includes horizontal agreements (agreements between companies at the same level in the production or distribution chain; e.g., between two manufacturers) • Includes vertical agreements (agreements between companies at different levels; e.g. between manufacturer and distributor) Docsity.com Article 81 “Effect on Trade Between Member States” • Article 81 requires that an agreement or practice “may” affect trade between Member States • sufficient if practice is “capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market” Docsity.com Article 81(3) Individual Exemptions • Previously, notification to the Commission was required under Form A/B • Under new Reg. 01/03, notification system abolished • Competition authorities of member states and courts will apply Article 81(3) without need for prior notification Docsity.com Article 81(3) Block Exemptions • Apply to categories of agreements • No notification necessary • Examples: – certain R&D horizontal agreements – specialization horizontal agreements – certain IP licensing vertical agreements Docsity.com Article 81(3) Horizontal Guidelines • Guidelines on the Applicability of Article 81 to Horizontal Cooperation – flexible “blacklist approach” – requires analysis of market power, and procompetitive benefits of the agreement or practice Docsity.com Article 81 Penalties • Nullification of agreements • Declaratory relief ordering cessation of violation • Fines – EC’s 1998 Guidelines on the Method of Setting Fines – Individual firm may be fined up to €20 million, or 10% of its turnover in the prior year, whichever is greater Docsity.com Article 82 • Prohibits any abuse – by one or more undertakings – of a dominant position – within the common market or in a substantial part thereof, to the extent that it may affect trade between member states Docsity.com Article 82 “Dominant position” • Product and geographic market definitions are fundamental Docsity.com Article 82 Relevant Geographic Market • An area in which the conditions of competition applying to the product concerned are sufficiently homogeneous for all traders (ECJ) Docsity.com Article 82 Relevant Geographic Market • The EC’s Market Definition Notice defines it as the “area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous, and that can be distinguished from neighboring areas because the conditions of competition are appreciably different in those areas.” Docsity.com Article 82 Relevant Geographic Market • Factors considered under the EC’s Market Definition Notice: – supply-side considerations – demand-side substitution (whether customers would switch to suppliers located elsewhere in response to a hypothetical small (5 to 10%) but permanent price increase Docsity.com Article 82 Dominance • Market power is usually demonstrated through high market shares • Countervailing considerations such as ease of entry, buyer power and other specific conditions of a market may rebut a finding of market power despite a high market share Docsity.com Article 82 Dominance • Market shares over 70% generally per se evidence of dominance • Over 50% may support finding of per se dominance (AKZO) • Between 40 and 50% raises presumption of dominance • Between 30 and 40% usually insufficient without other circumstances • Below 30% unlikely, but no “safe harbor” Docsity.com Article 82 Collective Dominance • Two or more undertakings may collectively hold a dominant position • Only recently recognized by CFI and ECJ • Based on idea that, in concentrated markets, usually of homogenous products, greater risk exists of explicit or tacit collusion • High evidentiary threshold to prove that the undertakings will collude Docsity.com Article 82 “Abuse” • The EC, CFI and ECJ have found abuses in other circumstances, including: – refusals to supply – refusals to license – rebate schemes – exclusive dealing – predatory pricing Docsity.com Article 81 Penalties • Declaratory relief ordering cessation of violation – Fines (same as Article 81) EC’s 1998 Guidelines on the Method of Setting Fines – Individual firm may be fined up to €20 million, or 10% of its turnover in the prior year, whichever is greater Docsity.com The ECMR • The EC Merger Regulation (ECMR) confers exclusive jurisdiction on the EC to review certain “concentrations” -- those having “Community dimension” • The EC distinguishes concentrations (subject to the ECMR) and the acquisition of a noncontrolling shareholder, which may be subject to Article 81 Docsity.com The ECMR Community Dimension • Test 2: – Combined aggregate worldwide turnover of all undertakings is more than €2.5 billion; and – Combined aggregate worldwide turnover of all undertakings in each of at least 3 Member States is more than €100 million; and – In each of at least 3 Member States, at least 2 of the undertakings have a turnover of more than €25 million; and . . . Docsity.com The ECMR Community Dimension • Test 2 (continued): – the aggregate Community-wide turnover of each of at least 2 of the undertakings is more than €100 million; – UNLESS each of the undertakings concerned achieves more than 2/3 of its aggregate Community-wide turnover within one and the same Member State Docsity.com The ECMR Community Dimension • Calculation of turnover includes the undertaking involved and its group of companies (subsidiaries and affiliates) • Where only part of a company is bought, only the turnover of the parts is considered, rather than the turnover of the seller and the group of companies to which it belongs Docsity.com The ECMR Review Procedure • EC publishes concentration in the Official Journal, inviting comments from third parties • EC must make decision within one month whether a concentration raises “serious doubts as to its compatibility with the common market” • May be extended to 6 weeks Docsity.com The ECMR Review Procedure • If the Commission determines that a concentration raises serious doubts, it must initiate second stage proceedings • Final decision required within four months after opening of second stage Docsity.com The ECMR Substantive Test • Concentrations with a Community dimension are incompatible with the common market if they create or strengthen a dominant position that significantly impedes effective competition in the Community or a substantial part thereof • Article 82 market definition concepts apply Docsity.com The ECMR Fines • Failure to notify may result in fines of up to €50,000 • In addition, fines of up to 10% of the turnover of the undertakings may be imposed if a concentration is implemented without clearance -- in addition to divestitures ordered to restore competition Docsity.com The ECMR The Merger Task Force • Separate group within EC to review mergers • Reviews on average about 300 notifications per year Docsity.com The ECMR Court Review of Merger Decisions • Theoretically ECMR decisions are subject to review by the CFI and ECJ • In reality, such cases take about 2 to 3 years, so court review is regarded generally as unavailable from a practical standpoint • Cf. U.S. preliminary injunction decisions within months of H-S-R decisions Docsity.com